Gold price (XAU/USD) trades in positive territory near $4,240 during the early Asian session on Friday. The precious metal rebounds from a six-month low after US President Donald Trump said he canceled planned military strikes against Iran, fueling hopes that a US-Iran truce deal is close.
The BBC reported on Thursday that Trump said he had called off Iran strikes, saying negotiations with Tehran were "brought to the highest level of Iranian leadership and approved.” Nonetheless, Iran stated that a deal Tehran“has not yet reached a final conclusion regarding an agreement.”
Hopes for a diplomatic way out of the war that has rattled global markets drag the US Treasury yields and the US Dollar (USD) lower, supporting the USD-denominated commodity price.
“Gold is clearly significantly oversold just now, and it remains to be seen whether this is a recovery as such or simply short positions taking profit,” independent analyst Ross Norman said.
The upside for the yellow metal might be limited as elevated crude oil prices can accelerate inflation and keep interest rates higher for longer. It’s worth noting that Gold is often used amid geopolitical uncertainty but does not yield interest, making it less attractive when interest rates are high.
The Federal Reserve (Fed) is expected to leave rates unchanged in Kevin Warsh’s first meeting as Fed chair next week. Traders are now pricing nearly a 67% probability of a US rate hike in December, according to the CME FedWatch tool.
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